Logistics Market China

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1 Logistics Market China November 2014

2 Executive Summary Market Logistics market value in China is expected to reach USD 55.1 tn by 2018 from USD 28 tn in 2012, growing at a CAGR of 11.9% Industrial products accounted for a major share of 91.4% of the logistics market value in 2012 Drivers & Challenges Drivers: - Healthy Economy - Rising Income and Increasing Domestic Consumption - Growing E-commerce Business - Manufacturers Shift to the West - Strong Retail Sales - Opportunity from Cold Chain Logistics - Opportunity from Pharmaceutical Logistics Challenges: - Rise in Logistics Costs Due to Low Efficiency - Lack of Modern Logistics Facilities - Inadequate Warehouse Space - Regional Protectionism - Constraints in Human Resources - Preference Towards Self Management Government Initiatives Trends Competition Reorganization of Logistics-Related Administrative Institutions in 2008 Fragmented Regulatory Framework Development Plan of Commercial Logistics (2011) Logistics Key Focus Areas under the 12th Five Year Plan ( ) Medium-and Long-term Development Plan of Logistics Industry ( ) Seven point plan for ( ) Development of National Transport Infrastructure Market Consolidation Logistics Outsourcing Inland Expansion of Third Party Logistics Rising Investments Major Players Sinotrans Ltd. FedEx Corporation DHL Logistics Pvt. Ltd. 2

3 Macroeconomic Indicators Introduction Market Overview Drivers & Challenges Government Initiatives Trends Mergers & Acquisitions Competitive Landscape Strategic Recommendations Appendix 3

4 Macroeconomic Indicators (1/3) Current Account Balance USD bn a1 b2 c3 d4 e5 f Exchange Rate: Half Yearly USD/INR b1 Period Average c1 c2 Period High Period Low d1 d2 d3 e2 e1 e3 a1 a2 b2 c a3 b3 1/1/14 2/1/14 3/1/14 4/1/14 5/1/14 4

5 Logistics Industry Framework Load Logistics Provider (LLP) Professional Services Consulting, IT Systems Integrators, SCM Application Providers Courier Postal / Mail Services Contract Logistics (3PL) Value Added Services, Warehousing, Transportation, Distribution Cargo Rail Companies Railways Equipment Providers Regulator (Government Authorities, Industry Association) Airports Road/ Highway Providers Cargo Airlines 4PL Logistics related Financial Services Shipping Companies Sea and Inland Ports Trucking Companies LTL / FTL Express Infrastructure Carriers Delivery Type Service Providers Parcel Freight Forwarding Road LTL / FTL, Air Freight, Sea Freight, Rail Freight Note: LTL refers to less than truckload, FTL refers to full truckload, 3PL refers to Third-Party Logistics, 4PL refers to Fourth-Party Logistics and SCM refers to Supply Chain Management 5

6 Logistics market in China is exhibiting rapid development with annual double digit growth expected through Logistics Market Overview Logistics industry is acting as a bridge between the value chain from production to sales It plays a key role in China s smooth economic development In 2012, the logistics demand coefficient which is the logistics industry s value to GDP ratio, was 3.4, which is higher than the coefficient in 2011, implying a steady growth in the logistics market Booming manufacturing sector is the main factor behind China s economic development Industrial products have the maximum value in the country s total logistics value Logistics industry is highly dependent on transport facilities for its growth Growth in the logistics industry will accelerate the network and density of the five major segments of the market express, road freight, air freight, contract logistics and international freight forwarding Logistics Market Value and Growth USD tr r q p 0 a1 a2 a3 11.9% a4 a5 a6 Logistics Market Value Category-wise x2 x4 x5 x3 x Segment 1 Segment 2 Segment 3 Segment 4 Segment 5 a7 6

7 Drivers & Challenges Summary Drivers Healthy Economy Rising Income and Increasing Domestic Consumption Growing E-commerce Business Manufacturers Shift to the West Strong Retail Sales Challenges Rise in Logistics Costs Due to Low Efficiency Lack of Modern Logistics Facilities Inadequate Warehouse Space Regional Protectionism Constraints in Human Resources Preference Towards Self Management Opportunity from Cold Chain Logistics Opportunity from Pharmaceutical Logistics 7

8 Government has implemented certain measures to reorganize the regulatory structure of the logistics industry Reorganization of Logistics-Related Administrative Institutions in 2008 In 2008, there was a major reorganization at the ministry level to streamline government bodies associated with the transport system Ministry of Transport was established by consolidating the functions of a number of government departments regulating civil aviation, postal services, communications and urban public transportation According to China s new Postal Law which became effective on 1 st Oct 2009, only China s state owned post offices can deliver domestic letters and documents This law also imposes a minimum capital requirement of ~USD72,963, indicating the exit of small players from the market Ministry of Communications Civil Aviation Administration of China Urban traffic management under the Ministry of Construction Functions merged Ministry of Transport Under Purview of State Bureau of Civil Aviation State Post Bureau 8

9 Trends Summary Development of National Transport Infrastructure Market Consolidation Key Trends ` Logistics Outsourcing Inland Expansion of 3PLs Rising Investments 9

10 Porter s Five Forces Analysis Threat of New Entrants Impact x Impact x Impact x Impact x Bargaining Power of Suppliers Competitive Rivalry Bargaining Power of Buyers Impact x Threat of Substitutes 10

11 Competitive Benchmarking (2/5) Key Ratios of Top 3 Companies Operational Basis (FY 2013) (1/3) % a1 b1 Operating Margin Net Margin 10 0 Company A a2 Company B b2 a3 Company C b3 Company A recorded operating margin of x1%, higher than that of Company B which recorded operating margin of y2% but lower than that of Company C which recorded operating margin of z3% Net margin for Company A, Company B and Company C are a1%, b2% and c3% respectively, wherein Company A has the highest net margin among these three companies 11

12 Public: Domestic Company Company 1 (1/5) Company Information Offices and Centres India Corporate Address Tel No. Fax No. Website Year of Incorporation Ticker Symbol Stock Exchange Products and Services Mumbai Head Office Category Products/Services Key People Name Person 1 Person 2 Person 3 Person 4 Designation MD and Executive Director VC and VC of Share Transfer Committee Director Director 12

13 Public: Domestic Company Company 1 (2/5) Financial Snapshot e d c b a a1 z Total Income Financial Summary Net Profit/Loss The company earned a net profit of INR x1 mn in FY 2013, as compared to net profit of INR x2 mn in FY 2012 The company reported total income of INR y1 mn in FY 2013, registering an increase of y2% over FY 2012 The company earned an operating margin of z1% in FY 2013, an increase of z2percentage points over FY 2012 The company reported debt to equity ratio of a1 in FY 2013, an increase of a3% over FY 2012 Key Financial Performance Indicators a2 z Indicators Value (20/03/2014) a3 z Key Ratios a4 z s r q p Particulars Profitability Ratios Operating Margin Net Margin Profit Before Tax Margin Return on Equity Return on Capital Employed Return on Working Capital Return on Assets Return on Fixed Assets Cost Ratios Operating costs (% of Sales) Administration costs (% of Sales) Interest costs (% of Sales) Liquidity Ratios Current Ratio Cash Ratio Leverage Ratios Debt to Equity Ratio Debt to Capital Ratio Interest Coverage Ratio Efficiency Ratios Fixed Asset Turnover Asset Turnover Current Asset Turnover Working Capital Turnover Capital Employed Turnover y-o-y change ( ) Improved Decline 13

14 Public: Domestic Company Company 1 (3/5) Key Business Segments Key Geographic Segments Segment 1 Segment 2 Region 1 Region 2 C% a1% C% x1% B% b1% b2% b3% b4% B% y1% x2% x3% x4% A% A% Business Highlights Description News Overview The company has operations in Country A, Country B and Country C that offers treatment for acute and chronic diseases in primary, secondary and tertiary care sectors Services Specializes in 50 specialties comprising cardiac sciences, oncology, radiology and imaging, gastroenterology, neurosciences, orthopedics, critical care services and in minimally invasive surgeries and transplantation Operates retail pharmacy outlets all across the country 14

15 Public: Domestic Company Company 1 SWOT Analysis (5/5) S O W T 15

16 Thank you for the attention Logistics Market China report is part of Netscribes Automotive and Logistics Industry Series. For any queries or customized research requirements, contact us at: Phone: About Netscribes Netscribes is a knowledge-consulting and solutions firm with clientele across the globe. The company s expertise spans areas of investment & business research, business & corporate intelligence, content-management services, and knowledge-software services. At its core lies a true value proposition that draws upon a vast knowledge base. Netscribes is a one-stop shop designed to fulfil clients profitability and growth objectives. Disclaimer: This report is published for general information only. Although high standards have been used in the preparation, Netscribes is not responsible for any loss or damage arising from use of this document. This document is the sole property of Netscribes and prior permission is required for guidelines on reproduction. 16